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Buying Gold Properly For Beginners

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Anyone who wants to buy gold can choose between gold bars and coins and a variety of securities that are linked to the development of the gold price. Which products are the right choice depends on the goals of the individual investor. The products that investors can use to buy gold directly and indirectly are almost as diverse as the flora and fauna in the Brazilian rainforest- and sometimes just as exotic. There is nothing that does not exist: bars, coins, exchange traded commodities (ETC), certificates, warrants, futures, mini-futures and other leverage products. Which is the right product depends on the respective goal: Anyone who invests for the long term and wants to diversify their portfolio with gold is well advised with ETC, which map the gold price development. Gamblers who want to speculate on gold price movements in the short term are right with leverage products. With these securities you can make big bets with a small stake. But the risk is correspondingly higher.

For investors who want to hold gold as insurance against disasters such as a currency collapse, the only option is buying gold bars. Internationally recognized coins, for which buying and selling prices are determined daily, are also an option. The most popular are the Krugerrand, Eagle, Maple Leaf, Britannia, Vienna Philharmonic, and Kangaroo. However, they are less recommendable because of the higher transaction costs compared to gold bars.

No guarantees with Gold ETC

No alternative to bars and coins are certificates and so-called ETCs, which, similar to an exchange-traded index fund (ETF), map the development of the gold price. These securities are always bonds: the buyer gives the issuer a loan. This means that there is an issuer risk. If the issuer of the security goes bankrupt, this can lead to a total loss. It is in the nature of things that the risk of issuer bankruptcy increases dramatically when there is chaos in the financial markets. Therefore, paper gold is not a suitable civil protection. This also applies if ETCs are physically secured . In these variants, the issuer buy gold bars to the value of the securities issued. The precious metal is held by subsidiaries that are legally separate from the company’s other business areas. This is to protect the investor gold from the bankruptcy of the parent company. But there are also pitfalls with this construction. It is uncertain that, in an emergency, there will actually be enough gold available to meet investors’ demands. This problem could easily be solved if a mutual fund would buy the gold and issue shares. For the investor money are at fund -protected funds and similar safe as a bullion in a bank vault. Funds in this country are not only allowed to invest in a single position, in this case gold, but must always spread the investor’s money.

Buy physical gold: Certified bars are the first choice

The direct purchase of gold bars is somewhat more complex and – depending on the quantity- often more expensive than the purchase of physically covered ETC, which investors can easily buy and sell on the stock exchange.

Anyone who invests in bars must pay attention to the gold content, weight and costs when buying. Only buy bars with a fine gold content of 999.9, i.e. 99.99 percent. Lower quality gold is more difficult to resell. Because it has to be melted down before it can be resold. No financial supervisor watches over the trading of gold bars and coins. There are also no legal requirements for the seller and the quality of their advice. If you want to buy gold , you should either contact a reputable gold dealer or a bank and first take a look at the gold price guide value on the Internet.

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